I hear it all the time: “You can’t get 12%” or “Dave Ramsey’s advice on investing is dangerous”!
How can Dave Ramsey’s advice be dangerous to his audience? After all, he has helped more people get out of debt and save money than any single person in the United States over the past 20 years.
Listen to Steve Stewart and Joshua Sheats debate various financial topics presented by Dave Ramsey on his radio show.
Joshua Sheats; providing an alternative to existing broadcast radio
Joshua Sheats is a Certified Financial Planner, a CLU, ChFC, CASL, and has more letters after his name than a bowl of alphabet soup. His podcast, Radical Personal Finance, provides an alternative to existing broadcast radio advice on money management. BTW: Steve is a fan.
Joshua became a Dave Ramsey fan as a young man in college. Inspired by Dave’s book, The Total Money Makeover, he was able to graduate from college debt free.
He dogmatically followed Dave’s baby steps exactly, but realized, after talking to many people, that he was in the minority – they weren’t following Dave Ramsey’s plan exactly as it was laid out.
Joshua’s thoughts on Dave Ramsey’s advice
Note: Joshua does not want to be branded as a Dave Ramsey hater. He has a lot of respect for Dave and followed the Baby Steps himself for a period of time with much success.
“We as a culture tend to look for the answer in a book, a single book written by the expert. What we fail to realize is that a book is usually the perspective and opinion of a single man. When it comes to personal finance, we must remember that decisions need to be based on individual circumstances. While there are technically right and wrong ways of handling money, these philosophies must adapt to individual circumstances and situations. It’s important to avoid the dogmatic approach and teach people to think about their individual situations, then teach them how to achieve their future goals.”
“There’s nothing in the Dave Ramsey baby steps that can’t work, they just don’t because nobody does them. The Dave Ramsey plan is not what Dave Ramsey does. What made Dave Ramsey rich is not the baby steps. It was his high paying career with a successful side business. Once you’re attached to a person, you become blind to the facts of what they are saying. You have allegiance to the person despite the message and your personal situation.”
Leasing a car
Joshua gives the scenario of a temporary move to a city, where you need a nice car for business but you don’t want to deal with maintenance or the hassle of selling the car later on. Leasing might be a viable option.
Is 8-10 times your income enough insurance to take care of your needs? A young family may actually need 20 times their income. But a wealthy 55 year old may need much less.
12 percent rate of return
Is the 12% rate of return realistic? Even a slightly lower rate of return will drastically reduce your retirement following Dave Ramsey’s advice. Will saving 15% be enough if you start at 45 years old?
Long Term Care Insurance
Should you wait till 60 years old to buy longterm care insurance? A person needs longterm care insurance when they acquire large enough assets that need protected from the expense of longterm care. That could be age 40, or it could be age 70.
Great personal finance broadcasts
Three of the biggest names in financial broadcasting are Ric Edelman, Clark Howard, and Dave Ramsey. Each offers free advice to individuals and points people to different resources for deeper one-on-one assistance.
- Ric Edelman: A Financial Advisor who uses his show as a marketing tool for his business. He will answer listener questions in a general way and encourages his callers to seek more advice from his own firm.
- Clark Howard: Interested in finance and has studied a lot. He gives simple answers to his callers and encourages them to seek more specific advice from fee only advisors.
- Dave Ramsey: Gives financial advice from his own debt experiences. Dave has rules and rarely deviates from those rules regardless of the personal situations. He will send people to his ELPs for more education and encourages people to never buy or invest in anything they don’t understand.
Steve gets the final word
An educated consumer is a better consumer. It’s up the individual to take the advice and apply it appropriately to their own circumstance. Don’t ever follow Dave Ramsey’s advice because “Dave Ramsey says…” or what Joshua says or what Steve says – you need to delve further and seek advice for our own personal situation and circumstances.
The enemy is financial ignorance and illiteracy.
Become a Debt Freedom Fighter by learning how money really works and pay attention!
Links mentioned in this episode:
Episode: Joshua’s plan for how I would become a Millionaire with a minimum wage job at Walmart